Cordray, a former state treasurer and attorney general in Ohio who is often touted as a possible candidate for governor in 2018, has emerged as the federal official conservatives, credit unions, payday lenders, and community banks just love to hate.
As director of the Consumer Financial Protection Bureau, Cordray and his allies claim the bureau has refunded $12 billion to nearly 30 million financial consumers while levying $600 million in fines to financial institutions.
Just last year, the bureau, the U.S. Office of the Comptroller of the Currency and Los Angeles City Attorney Mike Feuer concluded an investigation showing that Wells Fargo employees opened thousands of bank accounts without customer approval, prompting Cordray’s bureau to impose $185 million in penalties and refunds to consumers.
Yet even as Democrats such as Feuer say the work of Cordray and the bureau “to protect consumers matter now more than ever,” Republicans have regularly castigated it as the worst part of the financial regulation law approved by Congress after the 2008 financial collapse on Wall Street, which was fueled in part by the spread of shaky sub-prime home mortgage loans.
Not only did last year’s Republican platform assert Cordray has “dictatorial powers unique in the American Republic,” but at this month’s hearing, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, complained that “under Mr. Cordray’s leadership,” the consumer bureau “has shown an utter disregard for protecting our markets and has made credit more expensive and less available in many instances.”
Not a ‘flame thrower’
That Cordray would be the subject of such vitriol may have more to do with the office he runs than the person he is.
“This is not some flame thrower,” said Norman I. Silber, professor of consumer law at Hofstra Law School. “This is a person who has a very solid grasp of what the important problems are, and what the problems are that one can do something about.”
Unless President Donald Trump fires Cordray, he likely will remain in his post until his term expires in July of 2018. And while conservatives in Washington would love to have Cordray fired, some Ohio Republicans have urged Trump to keep him in office, fearing he would enjoy a political bump if fired by the Republican president.
“Canonizing Cordray” by firing him would make “him the odds-on favorite for getting the Democratic nomination for governor,” said Dennis Eckart, a former Democratic congressman from Cleveland. “He would be clearly defined by Trump’s own actions as the anti-Trump candidate.”
Cordray’s office did not make him available for an interview, preferring to provide written responses to questions. Those written responses shed little light on whether he plans to run for governor next year.
“I am 100 percent focused on my job to protect consumers.” he wrote in answer to the questions.
Republicans aren’t convinced. During the hearing, Hensarling sarcastically expressed surprise to see Cordray at the witness table because “there have been many press reports saying that you would have otherwise returned to Ohio to pursue a gubernatorial bid.”
Cordray and the bureau have been in the bulls-eye of conservatives and some financial institutions since the bureau was first championed by Elizabeth Warren, now a U.S. senator from Massachusetts.
With the Senate refusing to confirm Cordray’s nomination in 2011, President Barack Obama used a recess appointment to place him in the director’s post. Not until 2014 with the support of Democratic Sen. Sherrod Brown and Republican Sen. Rob Portman did the Senate confirm Cordray.
Among the accomplishments claimed by the bureau are regulations requiring financial institutions to write terms of credit card agreements and home mortgage loans in an easy-to-understand manner.
“They took complicated financial information and simplified it,” said Ryan Schick, a former small business adviser to Columbus Mayor Andrew Ginther. Schick said small business owners told him the consumer bureau has “peeled away some of the smoke.”
But the opposition has continued with Portman himself objecting to the bureau’s structure. He and many financial institutions have argued that placing the authority to run the bureau in the hands of a single director is unconstitutional, pushing instead for a board of commissioners such as the Federal Elections Commission.
In a 2-1 vote last October, a three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled that the director set-up violated the Constitution because the president could only fire the director for cause, such as neglecting his work. The full appeals court will hear the case later this year and it could well into next year before it goes before the U.S. Supreme Court.
Defenders of placing power in the hands of a single director say it leads to rapid decisions. But Aaron Stetter, executive vice president of the Independent Community Bankers of America, said, “From our perspective, it’s not about quick decisions; it’s about getting the decisions right. The five- member board would allow the opportunity to get good deliberative decisions.”
Although Stetter said he did not “have an issue” with Cordray’s “performance,” he complained about the “accumulation of the regulations that community banks have to comply with.
“That takes them from doing their primary job of serving their customers,” he said.
Community banks — some in this area include Woodforest National Bank in Dayton, WestBanco Bank in Beavercreek, and Farmers and Merchants Bank in Miamisburg — tend to be smaller than the banking giants on Wall Street.
In his quiet style, Cordray has firmly defended the consumer bureau. During his appearance before Hensarling’s committee, Cordray said “those who talk about weakening or destroying the Consumer Bureau are missing the importance of the work we are doing to stand up for individuals and families all over this country.”
“Nobody should want to return to a system that failed us and produced a financial crisis that damaged so many lives,” he said.
Marty Schladen of the Columbus Dispatch contributed to this story.
What you need to know about the Consumer Financial Protection Bureau
- Congress created the bureau in the 2010 financial regulation bill known as Dodd-Frank. It began operations in July of 2011 and Richard Cordray became its director in January of 2012.
- It was designed to provide transparency for consumers in financial transactions, and to investigate complaints filed by consumers against financial institutions of all sizes. Tips to the bureau in 2013 were a factor in the investigation into Wells Fargo Bank.
- The bureau claims it has refunded $12 billion to 29 million consumers since it began operations — a point made by supporters.
- Critics — community banks, payday lenders and credit unions in particular — complain Cordray's office overwhelms them with burdensome regulations that make it more difficult to loan money to consumers. Republicans in Congress have targeted the agency since the beginning.
- It almost certainly will survive, but perhaps as a commission as opposed to a single director. A three-judge panel of the U.S. Court of Appeals last October ruled the single director concept violated the Constitution because the president could only fire the director for cause, such as neglecting his or her duties. But the case could drag on well past the time Cordray's term in office expires in July of 2018.
By the numbers
- $12B: Amount of money the Consumer Financial Protection Bureau says it has refunded to nearly 30 million consumers.
- $600M: Fines levied against financial institutions since the agency began operations in July 2011.
- $185M: Amount of penalties and refunds to customers that resulted after Wells Fargo Bank employees opened thousands of bank accounts without customer approval.